Led by Chief Investment Officer David F. Swensen and operating under the guidance of Yale's Investment Committee, the Investments Office manages Yale's Endowment.

     Totaling $30.3 billion on June 30, 2019, the Endowment contains thousands of funds with a variety of purposes and restrictions. Approximately three-quarters constitute true endowment - gifts restricted by donors to provide long-term funding for designated purposes. The remaining one-quarter represents quasi-endowment, monies that the Yale Corporation chooses to invest and treat as endowment.

     During the decade ending June 30, 2019, Yale's investment program added $7.1 billion of value relative to the results of the mean endowment. The University's 20-year market-leading return of 11.4 percent per annum produced $28.6 billion in relative value. Over the past 30 years, Yale's investments have returned an unparalleled 12.6 percent per annum, adding $32.7 billion in value relative to the Cambridge mean. Sensible long-term investment policies, grounded by a commitment to equities and a belief in diversification, underpin the University's investment success.

The University

"Yale's Endowment is the engine that drives the university. It supports 34% of our total operations: from the financial aid we give to our great students to our cutting edge scientific research, from our world-class professors to our unparalleled art collections. The Yale Investments Office is simply the best in the world. It not only makes our research and education possible. It is itself the home of great research and education. It trains the best investment experts on the planet. It has changed Yale and the world."

Ben Polak, Provost and William C. Brainard Professor of Economics

The College

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“With essential support from the Endowment, Yale students and scholars are able to learn from each other in classes, residential colleges, study abroad programs, and extracurricular activities, making it possible for Yale College to provide one of the world's best undergraduate educations. The Endowment also makes this education accessible to all students, regardless of their financial means; over half of them receive financial aid without requiring debt. On behalf of Yale College students, staff, and faculty, I am grateful for the gifts of alumni and friends, and for how the Investments Office has multiplied these resources to benefit Yale sustainably. I am also grateful to David Swensen, both in his role as chief investment officer and also as a leading teacher for everyone who knows him. Provost Ben Polak says it best when he describes David as Yale’s moral compass. Profoundly gifted, deeply ethical, and full of love for family, friends, and Yale, he is a role model for for our students -- and our community.”

Marvin Chun, Dean of Yale College and Richard M. Colgate Professor of Psychology, Neuroscience and Cognitive Science 

The Graduate School of Arts and Sciences

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"Without a robust endowment, the Graduate School of Arts and Sciences cannot fulfill its mission. Top-tier graduate schools attract the strongest and brightest candidates by offering generous financial support that covers all costs for the duration of study. The Endowment makes it possible to provide support that sustains exciting research across the Graduate School, benefiting the entire University. Every year, we admit just over 500 of the best students from a pool of more than 10,000 applicants, each of whom requires four or more years to complete their research, whether in the lab, in international archives, or in our own libraries and collections. While pursuing their scholarship, they also teach Yale's excellent undergraduates and undertake other, important professional development activities. Our graduate students go on to become tomorrow's leaders, whether as scholars, researchers and teachers, or, just as importantly, as contributors to non-academic pursuits."

Lynn Cooley, Dean of Yale Graduate School of Arts and Sciences and C. N. H. Long Professor of Genetics

The Law School

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"Our Endowment serves as a bridge across generations, translating past successes into future opportunities. It supports a world-class faculty, a student body that is second to none, and facilities that inspire everyone who walks through our doors. Our Endowment enables us to preserve the school’s best traditions while ensuring we are nimble enough to retain our place at the vanguard of the legal profession. We never take it for granted, and we could not be more grateful to those who created it."

Heather K. Gerken, Dean of Yale Law School and Sol & Lillian Goldman Professor of Law

The School of Management

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"The Yale School of Management has an outsized impact on business and society because it is able to catalyze incredibly diverse endeavors of students, faculty, and alumni. Our Endowment underwrites all of those efforts. Income from the Endowment covers a significant portion of each student’s education, supports faculty research, and enables us to undertake new initiatives aimed at improving business education. The superlative management of the Yale Investments Office both maximizes the resources available to us and gives donors confidence that every dollar they give will have a long-term impact. It’s hard to imagine where the school would be without the leading work of the Yale Investments Office.

Kerwin K. Charles, Indra K. Nooyi Dean of Yale School of Management, and Frederic D. Wolfe Professor of Economics, Policy, and Management

Arts

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"The Endowment provides 62% of the Yale University Art Gallery’s annual budget. Endowment funds are critical to the Gallery’s excellence and touch every aspect of our operations and mission—from our always-free admission to new acquisitions of great works of art to hiring outstanding staff, fellows, and interns. Now more than ever, Endowment support is essential for developing the cutting-edge conservation research and the expansion of collections access that the Gallery is working toward in collaboration with the Yale Center for British Art, Yale Peabody Museum, and the Yale libraries. The Endowment provides exceptional experiences to the more than 220,000 people who visit the Gallery each year, and the many thousands of others around the world who engage with our collections online and through our publications and traveling exhibitions."

Stephanie Wiles, Henry J. Heinz II Director of the Yale University Art Gallery 

Athletics

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"The Yale Investments Office, under the brilliant leadership of David Swensen, allows Yale Athletics to actively pursue our mission to be unapologetic in excellence, relentless in pursuit of victory, and resilient in the face of loss. Thanks to the funds managed by David and his team, we can plan strategically for the evolution of the department and its bright future in the competitive landscape of college athletics. We dare to be great, because our Endowment provides the foundational resources to support 35 varsity sports, a robust recreation program, and facilities that are home to students, faculty, staff, and community members. Because of the Yale Endowment, our student-athletes leave Yale fit to lead and ready to do incredible things – representing this fine University in all of their endeavors."

Vicky Chun, Thomas A. Beckett Director of Athletics

 

The Library

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"Nearly 75% of the Yale University Library's budget is funded by the Endowment; without that income, the Library would be a mere shadow of what it is today. The breadth and depth of the Library's collections are transformative to teaching and research at Yale, and it is the Endowment that funds those collections, year over year. Without the Endowment, the Beinecke Rare Book & Manuscript Library would simply not be, thereby depriving, not just the students and faculty of Yale, but scholars worldwide, with free access to one of the world's largest libraries devoted entirely to rare books and manuscripts."

Susan Gibbons, University Librarian

Investment Philosophy

The Yale Investment Office seeks to provide high inflation-adjusted returns to support current and future needs of the University.  We work to establish an appropriate risk-adjusted asset allocation and seek out long-term partnerships across the globe with managers who provide deep analytical insights and improve the operations of public and private businesses. Over the past 30 years, relative to the median endowment, Yale’s asset allocation has contributed 1.9% per annum of outperformance and Yale’s superior manager selection contributed an additional 2.4% per annum.

     Yale's portfolio is structured using a combination of academic theory and informed market judgment. The theoretical framework relies on mean-variance analysis, an approach developed by Nobel laureates James Tobin and Harry Markowitz, both of whom conducted work on this important portfolio management tool at Yale’s Cowles Foundation.  Because investment management involves as much art as science, qualitative considerations play an extremely important role in portfolio decisions. The definition of an asset class is quite subjective, requiring precise distinctions where none exist. Returns and correlations are difficult to forecast. Historical data provide a guide, but must be modified to recognize structural changes and compensate for anomalous periods. Quantitative measures have difficulty incorporating factors such as market liquidity or the influence of significant, low-probability events. In spite of the operational challenges, the rigor required in conducting mean-variance analysis brings an important element of discipline to the asset allocation process.

David F. Swensen '80 Ph.D., '14 L.H.D. Investor and Teacher  April 1, 2015  Portrait: Alastair C Adams PPRP

David F. Swensen '80 Ph.D., '14 L.H.D.
                    Investor and Teacher                 Portrait: Alastair C Adams PPRP, April 1, 2015

 

Asset Allocation

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Over the past 30 years, Yale dramatically reduced the Endowment's dependence on domestic marketable securities by reallocating assets to nontraditional asset classes. In 1989, nearly three quarters of the Endowment was committed to U.S. stocks, bonds, and cash. Today, domestic marketable securities account for less than one-tenth of the portfolio, while foreign equity, private equity, absolute return strategies, and real assets represent over nine-tenths of the Endowment.

     The heavy allocation to non-traditional asset classes stems from their return potential and diversifying power. Today's actual and target portfolios have significantly higher expected returns and lower volatility than the 1985 portfolio. Alternative assets, by their very nature, tend to be less efficiently priced than traditional marketable securities, providing an opportunity to exploit market inefficiencies through active management. The Endowment's long time horizon is well suited to exploiting illiquid, less efficient markets such as venture capital, leveraged buyouts, oil and gas, timber, and real estate.

 

Supporting the University

     The Endowment spending policy, which allocates Endowment earnings to operations, balances the competing objectives of (1) supporting today’s scholars with annual spending distributions and (2) maintaining that support for generations to come. The spending policy manages the trade-off between these two objectives by using a long-term spending rate target combined with a smoothing rule, which adjusts spending in any given year gradually in response to changes in Endowment market value.

     Using the metrics of stable operating budget support and purchasing power preservation, simulations of Endowment performance demonstrated substantial improvement over the past thirty years. As Yale improved diversification by allocating more of the Endowment to the alternative asset classes of absolute return, private equity, and real assets, risks plummeted for both spending volatility and purchasing power degradation.

In 1985, when alternative asset classes accounted for only 11 percent of the Endowment, Yale faced a 10 percent chance of a disruptive spending drop, in which real spending drops by 10 percent over two years, and the average spending drop in the worst ten percent of simulations was 20 percent. Furthermore, the 1985 portfolio faced a 21 percent chance of purchasing power impairment, in which real Endowment values fall by 50 percent over fifty years. By 2019, when absolute return, private equity, and real assets accounted for approximately 77 percent of the Endowment, disruptive spending drop risk fell to 5 percent, the average worst spending drop decreased to 12 percent, and purchasing power impairment risk declined to 2 percent.